Province on track for 2013 surplus, says premier Redford

Kelly Cryderman And Chris Varcoe, Calgary Herald06.07.2012

It was Alison Redford, while Justice minister in Ed Stelmach’s government, who put forward legislation prohibiting the release of the names of those found guilty of illegal political donations, which goes against the very basis of a free and open society.

The Alberta government is keeping a watchful eye on sliding oil prices, but remains confident the province will end its string of deficit budgets next year.

Following a two-day Progressive Conservative caucus retreat in Calgary, Premier Alison Redford told reporters Wednesday she thinks a recent slide in oil markets will not jeopardize the province's budget or long-term plans.

"We're not a caucus that's going to run around saying, 'The sky is falling, the sky is falling.' We have plans," she said. "We're actually committed to a surplus next year and I'm still very confident about that."

Since peaking this year at $109.77 US a barrel in late February, crude oil has dipped 22 per cent based on weakening economic news and higher global production. On Wednesday, oil closed at $85.02 US a barrel on the New York Mercantile Exchange.

In the February budget, Finance Minister Doug Horner forecast oil would average $99.25 a barrel for the fiscal year starting April 1.

Aside from energy being the province's largest industry, oil prices have a direct impact on the bottom line of Alberta's $41-billion budget.

Every $1-a-barrel change over the course of a year below the budget assumption costs the treasury $223 million in revenue.

The province predicts it will see a $886-million deficit in the current fiscal year, followed by a $952-million surplus in 2013-14.

By 2014-15, the Tory government is projecting a $5.2-billion gusher as crude prices and production rise in tandem.

Horner noted there is more to government's revenue forecast than just commodity prices, pointing out royalty rates and production levels are key variables.

A report this week by the Canadian Association of Petroleum Producers forecast oil output in Western Canada will jump to 3.6 million barrels per day by 2015, up from 2.7 million last year.

The finance minister said the province has seen volatile crude prices swinging in both directions recently and he has no plans to retool the budget.

"If it was to jump to $110 a barrel tomorrow, are people going to be asking me what I'm going to be doing with the surplus at the end of the year?" Horner said in an interview. "We budget for a year, not for the moment."

The government may have to talk about "some corrections" if negative factors continue, but it's "way too early to be talking about that right now," Horner added.

But the Wildrose party cautioned that low oil prices threaten to "blow a major hole in this year's budget," potentially adding $2.5 billion to this year's deficit.

Wildrose Leader Danielle Smith noted Redford made several bigticket campaign promises in the spring election and has also vowed to keep taxes frozen.

"They're still hoping that energy prices are going to bail them out of the problem," Smith said.

"How on earth is she going to balance the budget with declining oil prices, not raise taxes and deliver on her spending promises? I think that's going to be the multibillion-dollar question that is still unanswered."

Commodity analyst Peter Buchanan at CIBC World Markets said the recent oil price slump has been triggered by several factors, including softening global economic data, European debt woes and higherthanexpected Iraqi production.

Buchanan noted his company is lowering its own oil forecast to about $95 to $100 US a barrel for this year and next.

"It's just a weaker global environment than many people had expected three or four months ago," said the CIBC senior economist.

Alberta's budget projections

Fiscal Year 2012-13 2013-14 2014-15

Revenue $40.3 B $44 B $49 B

Surplus/Deficit - $886 M + $952 M + $5.2 B

Oil prices: $99.25 $106.25 $108.25

* oil price forecast for WTI, prices US per barrel.

Source: Alberta Finance

kcryderman@calgaryherald.com

cvarcoe@calgaryherald.com

Comments

We encourage all readers to share their views on our articles and blog posts. We are committed to maintaining a lively but civil forum for discussion, so we ask you to avoid personal attacks, and please keep your comments relevant and respectful. If you encounter a comment that is abusive, click the "X" in the upper right corner of the comment box to report spam or abuse. We are using Facebook commenting. Visit our FAQ page for more information.

Almost Done!

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.